Home > 2015 > Personal Finance

9 Money Moves That Could Kill Your Retirement

Advertiser Disclosure Comments 2 Comments

For many of us, retirement is a great unknown. In your 20s, it seems so far away that it’s easy to figure you’ll start saving when you have more money. Of course, if you wait until you have “extra money,” you might never start at all.

But 20-somethings aren’t the only ones who do things that sabotage their retirement. Their parents may be putting their own retirement at risk by, for example, borrowing money to pay for a wedding, just when they should be turbocharging their own savings, especially if they started late.

So what are we to do? We don’t know that we’ll live to be 85 and still healthy enough to travel, or that the stock market will crash just before we retire. And yet we hope to plan as if we do know. Some of us dream about retirement — and many of us sabotage it at the very same time. Here are some money moves you may regret down the road.

1. Raiding Your Home Equity

Home equity can seem like a a piggy bank when you’re short on cash. And a “draw period” on a home equity line of credit before repayment of principal is due can make it feel almost like free money. Worse, it feels like you are borrowing from yourself. After all, you built up that home equity, right? But if you spend it now, you won’t have it later. And should you decide you want to sell or get a reverse mortgage at some point, that decision can come back to haunt you. You will walk away with less from a sale or be eligible for lower payments from a reverse mortgage. Either way, Retired You could suffer from the decision.

2. Unplanned Roth IRA Withdrawals

Some experts recommend Roths as vehicles to save for a first home or as a place to park an emergency fund because the money grows tax-free. If you have planned to use the money for a first home, you can withdraw up to $10,000. It can also come to your rescue for unforeseen expenses. Its flexibility is both an advantage and a temptation, since raiding your retirement account now robs you of those funds and their compounding interest down the road.

3. Failing to Put Away Anything

For many of us, it’s easier to wait to save until we’re “more established” or until we’re making a little more money. Why aren’t we saving? Because there’s no extra money! The problem, of course, is there may well never be any extra money. Most of us don’t come to the end of the month and try to figure out what to do with all the money that’s left. Saving needs to be in the budget from the beginning. It’s often easiest to automate this.

4. Helping Adult Kids Financially

But they’re your children. And everyone makes mistakes. (Or maybe they think you did when you didn’t save thousands for a wedding.) There are exceptions, of course, but if you do help out financially, be sure you minimize your own costs or that you do not jeopardize your own retirement. It’s not usually a good idea to let them grow accustomed to a parental supplement. Relationships and money can be fraught, too. So think very carefully before you make your help monetary.

5. Co-Signing for a Child or Grandchild

They are just starting out and don’t have much of a credit history. Or they want to take out private student loans, and all that’s standing between them and next semester is your signature. The car they are financing, the lease they are signing … if your signature is on it, you are on the hook. If they pay late, your credit could be affected. And should you need a loan, this obligation will count as your debt for purposes of determining eligibility. Student loans can be particularly risky. In many cases, they can’t be erased in bankruptcy. If you have already co-signed on a loan, it’s important to check your credit regularly to see how it’s affecting your credit. You can get a credit report summary updated every 30 days on Credit.com to watch for important changes.

6. Failing to Have a Plan B

You probably hope or assume your good health (and that of your spouse, if you are married) will continue. You may be planning to stay with your current employer until you reach full retirement age. But people fall ill, or they get laid off before they planned to leave the workforce. Do you have a reserve parachute? Your standard of living won’t be as high, but knowing that you have a plan can make the situation a little less worrisome.

7. Poor Investment Choices

Even if you’ve managed to sign up for the 401(k) at work or to open an IRA for yourself, choosing the wrong funds or failing to diversify can set you up for failure. A target-date fund can be useful, but only if you choose the appropriate target. (If you’re in your 50s and choosing a 2050 target retirement date, you may get really lucky and see big gains — but you could also see big losses and not have much time to recoup them.) Likewise, it’s smart not to put all your nest eggs in the same investment basket. Do your own research or find a planner to find a mix you are comfortable with and that is appropriate for your age and goals.

8. Not Making Changes When Needed

Are your investments changing with your goals? And are you keeping track of all of your investments? If you’ve had several jobs (and several 401(k)s), it’s a good idea to do some consolidation. Keeping track of funds in several investment houses can make figuring out minimum withdrawals much more difficult once you are retired. Keep accounts organized.

9. Taking Social Security As Soon As You Can

In many cases, it’s better to wait. Your payment will be higher, although if you take it younger, you will get it for more years. Claiming it the minute you can may be tempting, but if you come from a family with a history of people living well into old age, consider whether you think the smaller checks will be worth it. (You can calculate a “break-even” age of how long you would have to live to collect as much as you would have had you started younger — so that checks from then on truly are additional money.) Conversely, if no one in your family has ever turned 80, you may want to opt for the earlier payout. And, of course, your financial situation when you retire will have a say. If you can’t make ends meet without Social Security, then you should take it.

Another mistake? Making all your plans — including retirement — for later. A life of sacrificing for a “later” that may or may not come is not much of a life. They key is balance. We’re not suggesting you never take a vacation, never give to a cause that is close to your heart or buy the car you’ve desperately wanted (and can now afford) so that years of self-denial will pay off someday … maybe. But it is good to know that if you live a long life, you’ll have the financial resources you need.

More Money-Saving Reads:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • BrookeWx

    The key is to start saving/investing early in life and be consistent (save with every paycheck). Taking advantage of a matching 401k plan should be a no brainer. The power of compounding is lost on many people. Also maxing out contributions when possible, eliminating debt, avoiding risks with your nest egg, planning for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.) and making catch up contributions once you reach 50 should all be part of everyone’s plan. And work at staying healthy to reduce illness, injuries and medical costs. I recently found the site Retirement And Good Living which provides information on all these issues as well as many other retirement topics and also has several retirement and health calculators.

  • heavyw8t

    I took social security as soon as I hit 62. My choice was carefully weighed, and here were the factors. I did not want to work another 4 1/2 years until I was 66 1/2. The logic there was twofold. The may give me more money every month 4 1/2 years later, but it would also deny me 4 1/2 years of checks while I still worked every day. “Worked” equals waking up every day, showering, tending to the dog, driving 28 miles to work, dealing with aggravation for 9 hours, driving 28 miles home, letting the dog out again, changing clothes, cooking, eating dinner, then passing out in a chair by 8pm. I would rather retire early. Also, are you really guaranteed 4 1/2 more years? Would you not hate the idea of dying at 66 years and 5 months of age and NEVER getting to enjoy even one day of retirement? I was in a near fatal car accident that opened my eyes to the fact that we are not guaranteed even one more tomorrow. The amount of money I have to live on is not excessive, but it is far from shoestring and I have enjoyed just short of 2 years of my early retirement. I recommend it highly.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team